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We begin the year with a case, Riverside County Public Guardian v. Snukst (2022) ___ Cal.App.5th ___, involving an elder with dementia who received Medi-Cal benefits.

The case, a blast from the past, illustrates how the State of California, under the law in effect until several years ago, could recoup the cost of such benefits from an elder’s revocable trust.

Probate Court Denies Reimbursement Request

In 2009 Joseph Snukst moved into a senior care facility in Riverside. He had dementia.

By 2015 his health issues had progressed to the point that the Riverside County Public Guardian became the conservator of his person and estate.

From 2013 until his death in 2016, Joseph was a Medi-Cal beneficiary and received health care services valued at $480,465.52.

Upon his passing, the California Department of Health Care Services presented a creditor’s claim to the public guardian seeking reimbursement of the full amount of Medi-Cal benefits.

It turns out that Joseph, back in 2004, had created a revocable trust and named it as the beneficiary of an annuity that he had purchased. It’s unclear how Joseph qualified for Medi-Cal benefits given the annuity. In any event, the annuity paid $804,456.13 to the trustee (also the public guardian) upon Joseph’s passing. Thus, there was a large pot of money from which the Department might collect.

Shawna Snukst, Joseph’s niece and the sole remainder beneficiary of his trust, successfully opposed the Department’s reimbursement request.

Court of Appeal Allows Reimbursement from Revocable Trust

The Court of Appeal reversed, concluding that “federal and state law governing revocable inter vivos trusts, as well as public policy, require that the department be reimbursed from the trust before any distribution to its beneficiary.”

The court reviewed the federal Medicaid Act, which provides benefits to persons over the age of 55 if their income and resources are insufficient to meet their health care costs. California participates in the federal Medicaid program through the state’s Medi-Cal program.

The Department of Health Care Services, under state law applicable to decedents passing before 2017, was obligated to seek and entitled to recover reimbursement for Medi-Cal benefits provided to a decedent from his or her estate or recipients of the decedent’s property by distribution or survival.

Indeed, as a public policy matter, allowing the State to recover the costs of medical services would replenish the program and allow the state to provide future services.

Hence, the annuity proceeds were not shielded from reimbursement merely because Shawna became the beneficiary of the trust upon Joseph’s passing. The Court of Appeal sent the case back to the trial court for further proceedings.

Different Result Under Current Law?

A key footnote in Riverside County Public Guardian explains that Welfare and Institutions Code section 14009.5 was amended in 2016 to limit estate recovery with respect to Californians dying on or after January 1, 2017. Hence, had Joseph died just six months later, the Department may have been unable to reach the annuity proceeds held in trust.

Indeed, under current California law, the Department has a narrower pool of assets from which to seek recovery. Generally speaking, the Department can seek reimbursement from estates that are subject to probate, not from assets passing via trusts, joint tenancy, or survivorship.

For general information, see the explanation of the Estate Recovery Program at the Department of Health Care Services website. California Advocates for Nursing Home Reform also publishes a booklet explaining Medi-Cal recovery laws.

Of course, you should explore the specifics of your personal situation with an elder law or estate planning attorney.